UPDATE 1-Brazil central bank may need 'some time' to halt rate cuts

Bruno Federowski

Published 7:52 AM ET Tue, 27 March 2018
Reuters

(Adds details from statement)

BRASILIA, March 27 (Reuters) - Brazil's central bank may take "some time" to evaluate the economic outlook before halting interest rate cuts, the minutes of its last policy meeting showed on Tuesday, suggesting its forecast for a final reduction in May may be premature.

The bank last week cut the benchmark Selic rate by 25 basis points to 6.50 percent as a string of underwhelming price figures kept a lid on inflation expectations for both this year and next.

In a statement, the bank said it would likely pursue another 25 basis-point reduction in May and then keep them steady in June, as long as the economy develops as expected. But the minutes of that meeting showed some policymakers preferred to take a more cautious stance.

"Some members expressed a preference for indicating that it should be necessary to wait for a few Copom meetings, until sufficient information is gathered to assess the behavior of the economy," the minutes said, referring to the central bank's regular policy meetings.

This raises the prospect that the most dramatic cycle of interest rate cuts in a decade, which brought the Selic rate down from a 10-year high of 14.25 percent to an all-time low, could continue for longer than expected.

For months, inflation has been stagnant below the lower bound of the official target range of 4.5 percent plus or minus 1.5 percentage points, amid double-digit unemployment rates and widespread idle capacity. (Reporting by Bruno Federowski Editing by Chizu Nomiyama)